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Recent Developments in the Economics of Price Discrimination

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  • Mark Armstrong

    (University College London)

Abstract

This paper selectively surveys the recent literature on price discrimination. The focus is on three aspects of pricing decisions: the information about customers available to firms; the instruments firms can use in the design of their tariffs; and the ability of firms to commit to their pricing plans. Developments in marketing technology mean that firms often have access to more information about individual customers than was previously the case. The use of this information might be restricted by public policy towards customer privacy. Where it is not restricted, firms may be unable to commit to the use they make of the information. With monopoly supply, an increased ability to engage in price discrimination will boost profit unless the firm cannot commit to its pricing policy. With competition, the effects of price discrimination on profit, consumer surplus and overall welfare depend on the kinds of information and/or instruments available to firms. The paper investigates the circumstances in which price discrimination causes all prices (and hence profit) to fall.

Suggested Citation

  • Mark Armstrong, 2005. "Recent Developments in the Economics of Price Discrimination," Industrial Organization 0511004, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpio:0511004
    Note: Type of Document - pdf; pages: 41
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    References listed on IDEAS

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    Cited by:

    1. John Thanassoulis, 2007. "Competitive Mixed Bundling and Consumer Surplus," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 437-467, June.
    2. Hans Degryse & Luc Laeven & Steven Ongena, 2009. "The Impact of Organizational Structure and Lending Technology on Banking Competition," Review of Finance, European Finance Association, vol. 13(2), pages 225-259.
    3. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, Elsevier.
    4. Bouckaert, J.M.C. & Degryse, H.A., 2006. "Opt In versus Opt Out : A Free-Entry Analysis of Privacy Policies," Discussion Paper 2006-96, Tilburg University, Center for Economic Research.

    More about this item

    Keywords

    Price discrimination; oligopoly; dynamic pricing;

    JEL classification:

    • L - Industrial Organization

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